SaaS metrics glossary
Every term with its formula, a worked example you can check, and the mistakes that quietly break it. The examples all follow one fictional book, so the numbers reconcile as you move between them.
Revenue
Monthly Recurring Revenue (MRR)
MRR is the normalized monthly value of every active subscription you have right now. It is a run rate, not a cash figure: it answers what a month of your current book is worth, not what landed in the bank.
Annual Recurring Revenue (ARR)
ARR is the annualized value of your recurring revenue, almost always computed as MRR times 12. It describes what the next twelve months are worth if the book stopped changing today.
Churn and retention
Churn Rate
Churn rate is the share of your customers, or of your revenue, that you lost during a period. Which of the two you mean changes the number substantially, so the qualifier matters as much as the figure.
Net Revenue Retention (NRR)
Net revenue retention is what happened to the revenue you already had. Take a cohort of existing customers, add the expansion they bought, subtract what they downgraded or cancelled, and compare against what they were worth at the start. New customers are excluded by definition.
Gross Revenue Retention (GRR)
Gross revenue retention is the share of existing revenue you held onto, counting only the losses. Downgrades and cancellations count against you; expansion earns no credit, so GRR can never exceed 100%.
Cohort Retention
Cohort retention groups customers by the month they started paying and follows each group forward, so you can see how long customers stay and how their spend develops, without newer customers masking older ones.
Per customer
Customer Lifetime Value (LTV)
Customer lifetime value estimates how much revenue a single customer produces across their whole relationship with you. In subscription businesses it is derived from average revenue per account and churn rather than observed directly, because most customers have not left yet.
Average Revenue Per Account (ARPA)
ARPA is your recurring revenue divided by the number of paying accounts: what the average customer is worth per month. It is also called ARPU or ARPC, with account, user and customer used loosely to mean the same thing in most SaaS reporting.
Movements
Expansion MRR
Expansion MRR is the additional recurring revenue you earn from customers you already have. Upgrades to a higher plan, extra seats, add-on modules and price increases all count; a new customer never does.
Contraction MRR
Contraction MRR is recurring revenue lost from customers who stayed: downgrades, removed seats, dropped add-ons and expired discounts running the other way. The customer is still yours, they are simply worth less.
Net MRR Movement
Net MRR movement is the total change in MRR over a period once every movement is added up: new business, expansion and reactivation on one side, contraction and churn on the other. It is the bridge between where MRR started and where it ended.
Dunning
Dunning is the process of recovering a failed subscription payment: the retry schedule, the emails asking the customer to update their card, and the eventual decision to cancel if nothing works. Revenue in dunning has not been lost yet, but it is the part of the book most at risk.
Run the numbers
Free calculators for the metrics above. Nothing you type leaves your browser.
Monthly and annualized customer churn from two numbers.
LTV CalculatorARPA, margin and churn in; lifetime value out.
MRR CalculatorPlans and customer counts in; MRR, ARR and a 12-month projection out.
NRR CalculatorOne period of movements in; NRR and GRR out, with the gap explained.